The market for recyclables, especially for the paper grades has continued to improve for January. The story here is demand, specifically a shift in demand. (In this case, a shift to the right). Given the vertical supply curve for co-mingled recyclables, when demand shifts the reaction from price will be significant which was certainly the case this month.
This begs the question as to what made the demand curve shift for recyclables. We can find the answer to this question by looking at the demand for the products manufactured in China and elsewhere, primarily linerboard, medium and boxboard, from the recyclables we supply. We find that these markets are moving aggressively upward with multiple linerboard price increases announced in December and early January. The world economy and especially the U.S. economy are strong and growing. The world needs more boxes to package our goods and that means the paper mills need more recycled fiber to feed their paper machines. Good for all of us in the Recycling Industry.
Looking forward, we see an uncertain picture for the short term. On the one hand, we do think demand for linerboard and medium will remain strong, but we also expect some erosion in export demand for recycled paper simply because the mills do not want to take delivery of shipments during the Chinese New Year which starts at the end of January. These two countervailing forces lead us to suggest that pricing may not move much in February.